John Burns Real Estate Consulting published a study by Rick Palacios Jr and Ali Wolf that makes some estimates as to how the student loans already made will impact the real estate industry. The study has a great infographic, but I couldn’t get it to copy here in a readable format, so click through to check that out.

The analysis was quite complicated and involved a few assumptions, but we believe it is conservative, primarily because we looked only at those under the age of 40 with student debt.

At a high level, the math is as follows:

Student debt has ballooned from $241 billion to $1.1 trillion in just 11 years.

29 million of the 86 million people aged 20–39 have some student debt.

Those 29 million individuals translate to 16.8 million households.

Of the 16.8 million households, 5.9 million (or 35%) pay more than $250 per month in student loans, which inhibits at least $44,000 per year in mortgage capability for each of them.

About 8% of the 20–39 age cohort usually buys a home each year, which would be 1.35 million transactions per year.

Using previous academic literature as a benchmark for our own complicated calculation, we then estimated that today’s purchase rate is reduced from the normal 8% depending on the level of student debt—ranging from 6.9% for those paying less than $100 per month in student loans to less than 1% for those paying over $1,300 per month. Other factors contribute to even less entry-level buying today.

This is a government policy issue, because since student loans are not discharged in bankruptcy, they are lower risk for the lender, and thus easy loans for students to take out. 18-22 year old kids are able to run up this massive debt at a time in their lives when many people are not particularly financially literate.